Christina Lafave, 25, faces up to 20 years in jail if found guilty of stealing the time piece, while performing a massage on 66-year-old Kenneth Herold.
Herold had paid the dancer for the private massage in his hotel room on January 15, the Las Vegas Review - Journal reports.
But he called security at 3am and accused Lafave of stealing the watch. She denies the allegation.
Herold told the police that while massaging him, Lafave had told him to take off the watch so she could massage his arms.
He put it on the ground but said it had gone several minutes later, the Review - Journal reports.
Police searched the room for the watch, before Lafave allegedly admitted where she had hidden it.
She was taken to hospital where an X-ray was done.
“Prior to medical staff assisting Lafave with the removal of the watch she admitted to them that she had stolen a watch and concealed the item in her vagina,” a police report said.
Defense lawyer Chris Rasmussen said he intends "to file a motion to suppress the medical intrusion.”
He said the search of his client was "unreasonable" and that "medical providers have to use equipment to conduct an invasive procedure to remove what police believe is evidence.”
He said the encounter between Herold and Lafave was consensual and that he gave her the watch but later he tried to take it back "when he wasn’t satisfied with her services."
He said the case amounted to Herold taking advantage of a young woman.
Lafave faces two felony counts, grand larceny and possession of stolen property.
She has been freed on bail and is set to appear before a judge in Las Vegas on May 15.
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